Hmm, dead software becomes reanimated, takes over a computer system, and then runs amok. I think I've seen that movie somewhere.

Also, according to the sources, “Knight’s staff looked through eight sets of software before determining what happened.” Almost sounds like there was a graveyard full of dead software ready to be reanimated.

Unfortunately, the article doesn't say anything more about how the dormant software awakened and interposed itself when it came to executing trades that were supposed to be initiated by the new software Knight had installed. It also doesn’t say why Knight would keep “eight sets of software” apparently resident in its execution environment. We’ll probably have to wait until the SEC finishes its investigation to find out what actually happened as well as, presumably, some juicy details about Knight's software development and system testing practices.

Nevertheless, the so-called “Knight-mare glitch” (among others) has spurred regulators in Asia and Australia to “clamp down” on high frequency trading firms, the Financial Times reported this week. The regulators are “unveiling sweeping proposals that would require traders to have controls on their systems and test them annually to prevent market disruption,” the paper said. Regulators want “pre-trade” risk controls in place to keep “aberrant” trading from happening, as well as trading “kill switches” when the risk controls fail.

By coincidence, several other California state agencies had computer networking problems yesterday as well, which the state blamed on an unexplained “circuit reconfiguration” issue. This unrelated issue, the AP reports, was also corrected by mid-day yesterday.

Finally, Manganese Bronze, the company that makes London’s familiar black taxi, announced this week that “it is delaying the release of its unaudited half-year results for the six months ended 30 June 2012 ... due to the need to restate prior years’ financial results because of accounting errors that have come to light.” The errors could probably be labeled computer-related errors, though, rather than accounting ones.

According to a company statement, in August 2010, a new integrated IT accounting system, which was installed to help manage the company’s “complex global supply chain,” missed some key transactions during the cut-over: “Due to a combination of system and procedural errors, a number of transactions relating to 2010 and 2011 and some residual balances from the previous system were not properly processed through the new IT system. This problem led to the over-statement of stock and under-statement of liabilities in the financial statements of previous years.” As a result, the company understated by £3.9 million its historical losses.